Karnataka court overturns 2022 ruling in BHEL consortium case


The Karnataka High Court’s division bench, led by Chief Justice Prasanna Varale and Justice MGS Kamal, has upheld a July 2023 appeal, overturning the 2 November 2022 ruling in Macawber Beekay Pvt Ltd vs BHEL and Ors.

The high court deemed the bid submitted by the consortium comprising BTL EPC (respondent No. 3) and Chinese company Fujian Longking (respondent No. 4), with Bharat Heavy Electricals Limited (BHEL), as invalid on national security concerns.

Macawber is a turnkey solutions provider to power industries for complete handling of ash, coal and slurry. BHEL is an Indian central public sector undertaking and the largest government-owned power generation equipment manufacturer.

Senior advocate Dama Seshadri Naidu represented the appellant Macawber. The Ortis Law Offices team, comprising Sandeep Grover, Aditya Nayyar, Tarang Agarwal and Abhishek Arora and advocate Parashuram AL briefed Naidu on the case.

Senior advocate Srinivasan Raghavan V represented BHEL (respondents No. 1 and No. 2), senior advocate M Dhyan Chinnappa represented BTL EPC (respondent No. 3) and senior advocate DLN Rao acted for Telangana State Power Generation Company Limited (respondent No. 5).

In the November 2022 dismissal of a writ filed by Macawber, the turnkey solutions provider questioned the awarding of the tender by BHEL to BTL EPC for the supply of an ash handling package forming part of the installation of a thermal power station in the state of Telangana by respondent No. 5.

Telangana State Power proposed the construction of a 4,000MW thermal power station in Yadadri, Telangana, which was due for completion by October 2021. It contracted BHEL to handle the bidding process following the issue of a tender notice. Telangana State Power was seeking bids for the design, engineering, supply, erection and commissioning, including the ash and coal handling plants. Part of the project was assigned to Bharat Heavy Electricals Limited Industrial Systems Group, a subsidiary of BHEL.

The tender process was conducted on BHEL’s e-procurement platform followed a two-tier system of pre-qualification requirements comprising technical qualification and financial bid components. The central point of contention in the court case concerns the technical part of the pre-qualification aspect of the tender process.

BHEL had considered Chinese entity Fujian Longking’s bid over Australian company Macawber’s proposal. The appellant contended that the Chinese entity did not have the required qualification prescribed under the pre-qualification requirements.

The Karnataka court said, “The action of respondent No. 2 in awarding the contract to respondent No. 3 who admittedly, did not possess the required technical qualification which is essential and critical for the performance of the contract.”

The court observed that while India and China share a border, relations between the countries have been strained. The court held that, “Considering the nature of the transaction and the nature of the work to be carried out by respondent Nos. 3 and 4, and also the mandatory requirement of registration with the competent authority not having been complied with, a mere claim of public interest getting adversely affected cannot be pitted against the national interest.”

Under Indian law, certain restrictions are imposed on a bidder from a country that shares a land border with India. The bidder must register with the Registration Committee constituted by the Department of Promotions of Industries on internal trade.

Considering national security and public interest, the Karnataka court ordered BHEL to reassess Macawber’s proposal for the Yadadri power station’s ash handling package. BHEL’s decision is pending.

The court said, “BHEL ought to have ensured that there was complete compliance with the office order, which has been issued in the interest of national security from the defence perspective and assumes greater national significance, than the public interest as sought to be made out by the respondent.”

The court emphasised the need to acknowledge the office order issued by the Ministry of Finance under rule 144 to defend India’s interests.

The court had further held that, “Merely because the financial bid quoted by respondent No. 3 is lesser than the financial bid quoted by the appellant, it cannot be said that there has been no arbitrariness and unreasonableness in awarding the contract.”